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Maquiladoras Prospects of Regional Integration and Globalization EMPLOYMENT AND TRAINING PAPERS 12 Maquiladoras prospects of regional integration and globalization Regina M.A.A. Galhardi Copyright © International Labour Organization 1997 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights or reproduction, or translation, application should be made to the ILO Publications Bureau (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland. The International Labour Office welcomes such applications. Libraries, institutions and other users registered in the United Kingdom with the Copyright Licensing Agency, 90 Tottenham Court road, London W1P 9HE (Fax:+44 171 436 3986), in the United States with the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923 (Fax:+ 1 508 750 4470), or in other countries with associated Reproduction Rights Organizations, may make photocopies in accordance with the licences issued to them for this purpose. ISBN 92-2-110955-0 ISSN 1020-5322 First published 1998 The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm,commercial product or process is not a sign of disapproval. ILO publications can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22,Switzerland. Catalogues or lists of new publications are available free of charge from the above address. Foreword This paper analyses the operations and prospects of export processing industries in Mexico in the context of regional integration and globalization. It draws on papers presented at the International Conference on “Globalization and the Future of Maquiladoras in Mexico” organized by the International Institute for Labour Studies of the ILO and the Colegio de la Frontera Norte (COLEF), held in Tijuana, Mexico, in May 1994. Other sources of information were also used. The paper covers topical issues such as industrial organization and economic structure; employment, labour relations, working conditions, wages and human resources development. It also compares Maquiladoras with plants in the US, Canada and Asian countries and discusses their role in the “global commodity chains”. An important aspect covered by this working paper is the effects of the North America Free Trade Agreement (NAFTA) in the Maquiladoras and its impact on local and regional economic development. The paper discusses firstly the economic and political context at the origin of the Maquiladora programme and how it has changed over time. It analyzes the evolution of Maquiladoras in terms of labour conditions, employment and skills. In particular, it discusses the opportunities and risks faced by Maquiladoras to cope with the new trade regime and globalization of production. Some policy options for local development within the framework of globalization and commercial and economic integration promoted by NAFTA are also examined. The author argues that an industrial transition from assembly operations towards more skilled and technologically advanced activities depends on the Maquiladoras’ participation into international markets and the regional economy, which directly affect labour conditions and skill requirements at the local level. The study is part of the Work Programme of the Employment and Labour Market Policy Branch on “Employment effects of globalization and regional integration”, and may be helpful in guiding future research on post-NAFTA changes in Mexican manufacturing and trade. Gek-Boo Ng Chief Employment and Labour Market Policies Branch Contents Foreword 1. Introduction ........................................................................ 1 1.1 What are maquiladoras: some clarifications ........................................ 2 1.2 Maquiladoras’ evolution: an industrial transition? ................................... 4 1.3 Supplier linkages and local content .............................................. 7 2. Labour conditions, employment and skills: deterioration or evolution? ......................... 8 2.1 Wages and benefits .......................................................... 9 2.2 Working and living conditions ................................................. 13 2.3 Job qualification ............................................................ 13 2.4 Labour Markets ............................................................ 14 2.5 Labour relationships ........................................................ 15 2.6 Employment .............................................................. 15 3. Maquiladoras in the post-NAFTA era: opportunity or threat? ............................... 17 3.1 The potential divise: some evidence ............................................ 17 3.2 A Comparison: Mexico and Canada ............................................. 19 4. “Maquiladoras” in a global perspective ................................................. 21 4.1 Maquiladoras in Mexico vs. East Asia EPZs ...................................... 22 4.2 Maquiladoras’ integration: possible scenarios ..................................... 23 5. Conclusions ....................................................................... 27 Bibliography ........................................................................ 30 List of Tables Table 1.1 Maquiladoras’evolution 1970-1993, selected indicators .............................. 1 Table 2.1 Employment evolution in maquiladoras ......................................... 16 List of Figures Figure 2.1 Real wages of low-skilled workers in maquiladoras and manufacturing industry ........... 9 Figure 2.2 Wages of “obreros”, “técnicos” and “empleados” ................................. 10 Figure 2.3 Real wages of “empleados” in maquiladoras and manufacturing industry ................ 11 Figure 2.4 Wage evolution for production workers ......................................... 12 1. Introduction Started in 1965, as an emergency measure to combat regional unemployment, the maquiladora programme in Mexico has had an explosive growth. With an annual growth rate of employment of 10 per cent versus the national average of 2 per cent, during the last 25 years, the maquiladora sector has become the most dynamic industrial process, experienced not only by the regional economies of the border but also by the Mexican economy as a whole. The number of maquiladoras in Mexico has grown from 50 small establishments in 1965 to nearly 800 in 1985 and, by 1990, there were roughly 1900 plants employing about 460,000 people. Most of them were in the Mexican-US border regions (Table 1.1). By 1995 the maquilas had grown to over 2,000 establishments with an average employment of 300 persons per establishment. According to forecasts, the employment figure will grow to more than 1300,000 by the end of the century (Alonso, Carrillo and Contreras, 1994, p. 203). The share of maquiladora employment as a percentage of Mexico’s total manufacturing employment went up from 4.9 per cent in 1980 to 16.8 per cent in 1993, with a greater impact (26 per cent) in the border states. Maquiladora employment reported an annual average growth of 12.6 per cent from 1980 to 1993. Table 1.1 Maquiladoras’ evolution 1970-1993, selected indicators 1970 1975 1980 1985 1990 1993 Number of plants 120 454 620 760 1 938 2 172 Border (%) n.a n.a n.a 88.4 76.2 72.5 Interior (%) n.a n.a n.a 11.6 23.8 27.5 Employment* 20.3 67.2 119.5 212.0 460.3 541.0 Border (%) n.a n.a 89.2 88.1 76.1 72.7 Interior (%) n.a n.a 10.8 11.9 23.9 27.3 Production ** n.a n.a n.a. 5 080 14 100 23 190 Average wage*** n.a 0.84 1.08 1.38 1.78 2.51 n.a = not available * Thousands **Thousand dollars. *** Dollars per hour. Source:- INEGI, Estadísticas de la Industria Maquiladora, SECOFI, México (several years) - CIEMEX-WEFA, Maquiladora Industry Analysis, Bala Cynwyd, September 1992. The foreign exchange picture is even brighter, with maquiladora exports generating more foreign exchange than any other sector in Mexico except oil production. Total maquiladora exports soared from almost US$ 2.5 billion in 1980 to US$ 10.1 billion in 1988. Imported inputs in 1988 were US$ 7.8 billion, resulting in a net value-added figure for Mexico of US$2.3 billion, which corresponds almost entirely to Mexican labour costs. This was equivalent to about one-third of the value-added for all Mexico’s manufactured exports (Gereffi, 1994, p.20). Concurrently, commerce and services expanded in the cities that concentrated on maquila operations. Despite the jobs created and the foreign exchange generated, it is argued that maquiladoras have remained on the fringes of the Mexican economy and have contributed little or nothing to
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